House Financial Services Committee Chair Jeb Hensalring (R-TX) released on April 19 a discussion draft of comprehensive financial regulatory reform legislation he intends to introduce soon. The Committee has scheduled a hearing on this legislation, titled the CHOICE Act, for April 26 at 10:00 a.m. Eastern time. Hensarling introduced similar legislation last Congress.

The discussion draft includes several provisions that may have affect rules governing HFA bond programs. Specifically, the bill requires the Securities and Exchange Commission (SEC) to consider several factors when proposing and finalizing new regulations, including an identification of the need for the regulation and the regulatory objective; an analysis of the adverse impacts regulated entities and other market participants could experience; and a quantitative and qualitative assessment of all anticipated direct and indirect costs and benefits of the regulation. Other federal financial regulatory agencies would have to follow these standards as well.

In addition, the discussion draft language mandates that SEC and the Municipal Securities Rulemaking Board (along with other federal financial regulatory agencies) conduct a regulatory impact review on each of its rules five years after it is published. SEC would also have one year after the CHOICE Act is enacted to conduct an analysis of its existing regulations and would have to repeat such an analysis every five years.

The CHOICE Act also contains language making it clear that issuers of municipal securities are not required to hire municipal advisors. This provision was included in response to complaints from issuers who were told that SEC’s 2013 Rule establishing a registration system for municipal advisors requires issuers to hire municipal advisors. Finally, the bill would place SEC’s Office of Municipal Securities under its Division of Trading and Markets. The Office currently reports directly to the SEC director.

The discussion draft also restricts the powers of the Consumer Financial Protection Bureau (CFPB), which oversees much of the mortgage lending industry. It renames the CFPB the Consumer Financial Opportunity Agency (CFOA) and limits the agency to enforcing current consumer protection laws. It specifically prohibits CFOA from writing new consumer protection rules, exerting supervisory authority over financial firms, enforcing fair lending laws, and publishing CFPB’s consumer complaint database.

Under the discussion draft, CFOA would be headed by a single director, the same model that now applies to the CFPB. Unlike current law, the President would be authorized to remove the CFOA director at will (currently, the President can only remove the CFPB director for cause). The President would also be able to remove at will the director of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. As with CFPB, the President currently may only remove the FHFA director for cause. The term of the current FHFA director, Mel Watt, ends in early 2019.

In addition to the changes described above, the CHOICE Act would make a number of adjustments to federal financial regulations and would allow financial institutions to exempt themselves from certain federal regulations if they are able to meet minimum capital standards.

NCSHA is analyzing the bill further to determine what impact it would have on HFAs and affordable lending. HFAs and their partners are encouraged to email Greg Zagorski any thoughts or questions they may have.